KULR Technology Group, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2023 2022 ​ ​ (unaudited) ​ ​ ​ Assets ​ ​ Current Assets: ​ ​ Cash ​ $ 1,167,315 ​ $ 10,333,563 Accounts receivable ​ 1,296,811 ​ 1,542,118 Inventory ​ 1,551,399 ​ 1,962,035 Inventory deposits ​ ​ 91,033 ​ ​ 285,260 Prepaid expenses and other current assets ​ 945,303 ​ 1,613,008 Total Current Assets ​ 5,051,861 ​ 15,735,984 Property and equipment, net ​ 4,909,766 ​ 3,193,041 Equipment deposits ​ ​ 1,615,286 ​ ​ 3,514,937 Security deposits ​ ​ 10,228 ​ ​ 60,441 Intangible assets, net ​ ​ 754,968 ​ ​ 720,768 Right of use asset, net ​ ​ 193,210 ​ ​ 328,941 Deferred financing costs ​ ​ 71,818 ​ ​ 71,818 Total Assets ​ $ 12,607,137 ​ $ 23,625,930 ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders' Equity ​ ​ ​ Current Liabilities: ​ ​ ​ Accounts payable ​ $ 1,813,191 ​ $ 1,408,017 Accrued expenses and other current liabilities ​ 3,018,326 ​ 2,142,277 Accrued issuable equity ​ ​ 98,540 ​ ​ 227,956 Lease liability, current portion ​ ​ 172,569 ​ ​ 223,645 Prepaid advance liability, net of discount, current portion ​ ​ 5,910,405 ​ ​ 5,655,612 Deferred revenue ​ ​ 393,934 ​ ​ 23,000 Total Current Liabilities ​ 11,406,965 ​ 9,680,507 Lease liability, non-current portion ​ ​ — ​ ​ 97,958 Prepaid advance liability, net of discount, non-current portion ​ ​ — ​ ​ 3,196,678 Accrued interest, non-current ​ ​ — ​ ​ 157,054 Total Liabilities ​ ​ 11,406,965 ​ ​ 13,132,197 ​ ​ ​ ​ Commitments and contingencies (Note 12) ​ ​ ​ ​ ​ Stockholders’ Equity ​ ​ Preferred stock, $ 0.0001 par value, 20,000,000 shares authorized; ​ ​ ​ ​ Series A Preferred Stock, 1,000,000 shares designated; none issued and outstanding at September 30, 2023 and December 31, 2022 ​ ​ — ​ ​ — Series B Convertible Preferred Stock, 31,000 shares designated; none issued and outstanding at September 30, 2023 and December 31, 2022 ​ — ​ — Series C Preferred Stock, 400 shares designated; none issued and outstanding at September 30, 2023 and December 31, 2022 ​ ​ — ​ ​ — Series D Preferred Stock, 650 shares designated; none issued and outstanding at September 30, 2023 and December 31, 2022 ​ ​ — ​ ​ — Common stock, $ 0.0001 par value, 500,000,000 shares authorized; 127,697,113 shares issued and 127,565,951 shares outstanding at September 30, 2023; 113,202,749 shares issued and 113,071,587 shares outstanding at December 31, 2022 ​ 12,770 ​ 11,320 Additional paid-in capital ​ ​ 62,577,789 ​ ​ 53,372,673 Treasury stock, at cost; 131,162 shares held at September 30, 2023 and December 31, 2022 ​ ​ ( 296,222 ) ​ ​ ( 296,222 ) Accumulated deficit ​ ( 61,094,165 ) ​ ( 42,594,038 ) Total Stockholders’ Equity ​ 1,200,172 ​ 10,493,733 Total Liabilities and Stockholders' Equity ​ $ 12,607,137 ​ $ 23,625,930 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ ​ 3 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2023 2022 2023 2022 Revenue ​ $ 3,041,007 ​ $ 1,393,185 ​ $ 7,496,315 ​ $ 2,181,230 Cost of revenue ​ 1,703,553 ​ 932,364 ​ ​ 4,513,285 ​ ​ 1,478,954 Gross Profit ​ 1,337,454 ​ 460,821 ​ 2,983,030 ​ 702,276 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Expenses ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 1,640,959 ​ 1,069,852 ​ 4,873,841 ​ 2,790,683 Selling, general, and administrative ​ 4,793,523 ​ 4,349,373 ​ 15,546,915 ​ 12,210,458 Total Operating Expenses ​ 6,434,482 ​ 5,419,225 ​ 20,420,756 ​ 15,001,141 Loss From Operations ​ ( 5,097,028 ) ​ ( 4,958,404 ) ​ ( 17,437,726 ) ​ ( 14,298,865 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (Expense) Income ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ ( 187,574 ) ​ ( 633,342 ) ​ ( 544,615 ) ​ ( 676,622 ) Gain on forgiveness of PPP loan and interest ​ ​ — ​ ​ 158,675 ​ ​ — ​ ​ 158,675 Amortization of debt discount ​ ​ ( 234,899 ) ​ ​ ( 172,407 ) ​ ​ ( 695,773 ) ​ ​ ( 275,626 ) Loss on debt extinguishment ​ ​ — ​ ​ ( 8,508 ) ​ ​ — ​ ​ ( 8,508 ) Change in fair value of accrued issuable equity ​ ​ ( 42,773 ) ​ ​ 27,401 ​ ​ 177,987 ​ ​ 123,121 Total Other Expense, net ​ ( 465,246 ) ​ ( 628,181 ) ​ ( 1,062,401 ) ​ ( 678,960 ) Net Loss ​ $ ( 5,562,274 ) ​ $ ( 5,586,585 ) ​ $ ( 18,500,127 ) ​ $ ( 14,977,825 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Per Share ​ ​ ​ ​ ​ ​ ​ ​ - Basic and Diluted ​ $ ( 0.05 ) ​ $ ( 0.05 ) ​ $ ( 0.16 ) ​ $ ( 0.14 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Number of Common Shares Outstanding ​ ​ ​ ​ ​ ​ ​ ​ - Basic and Diluted ​ 117,144,452 ​ 105,572,820 ​ 115,149,761 ​ 104,223,378 ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 4 Table of Contents ​ KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-In ​ Treasury Stock ​ Accumulated ​ Stockholders' ​ Shares Amount Capital Shares Amount Deficit Equity Balance - January 1, 2023 113,202,749 ​ $ 11,320 ​ $ 53,372,673 ​ 131,162 ​ $ ( 296,222 ) ​ $ ( 42,594,038 ) ​ $ 10,493,733 Common stock issued for the repayment of prepaid advance liability and related interest accrual ​ 3,153,036 ​ ​ 315 ​ ​ 3,750,653 ​ — ​ ​ — ​ ​ — ​ ​ 3,750,968 Shares repurchased for payroll taxes and canceled ​ ( 175,000 ) ​ ​ ( 17 ) ​ ​ ( 229,232 ) ​ — ​ ​ — ​ ​ — ​ ​ ( 229,249 ) Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock awards granted ​ 1,848,508 ​ ​ 185 ​ ​ ( 185 ) ​ — ​ ​ — ​ ​ — ​ ​ — Unvested restricted stock awards canceled ​ ( 75,000 ) ​ ​ ( 8 ) ​ ​ 8 ​ — ​ ​ — ​ ​ — ​ ​ — Common stock issued for services ​ 5,500 ​ ​ 1 ​ ​ 6,819 ​ — ​ ​ — ​ ​ — ​ ​ 6,820 Amortization of restricted common stock ​ — ​ ​ — ​ ​ 765,100 ​ — ​ ​ — ​ ​ — ​ ​ 765,100 Amortization of stock options ​ — ​ ​ — ​ ​ 40,605 ​ — ​ ​ — ​ ​ — ​ ​ 40,605 Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 6,602,861 ) ​ ​ ( 6,602,861 ) Balance - March 31, 2023 ​ 117,959,793 ​ ​ 11,796 ​ ​ 57,706,441 ​ 131,162 ​ ​ ( 296,222 ) ​ ​ ( 49,196,899 ) ​ ​ 8,225,116 Common stock issued for the repayment of prepaid advance liability and related interest accrual ​ 925,935 ​ ​ 93 ​ ​ 715,565 ​ — ​ ​ — ​ ​ — ​ ​ 715,658 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization of restricted common stock ​ — ​ ​ — ​ ​ 823,540 ​ — ​ ​ — ​ ​ — ​ ​ 823,540 Amortization of stock options ​ — ​ ​ — ​ ​ 44,311 ​ — ​ ​ — ​ ​ — ​ ​ 44,311 Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 6,334,992 ) ​ ​ ( 6,334,992 ) Balance - June 30, 2023 ​ 118,885,728 ​ ​ 11,889 ​ ​ 59,289,857 ​ 131,162 ​ ​ ( 296,222 ) ​ ​ ( 55,531,891 ) ​ ​ 3,473,633 Common stock issued pursuant to the equity financing: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For cash, net of issuance costs (1) ​ 8,214,285 ​ ​ 821 ​ ​ 2,285,949 ​ — ​ ​ — ​ ​ — ​ ​ 2,286,770 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restricted stock awards granted ​ 370,000 ​ ​ 37 ​ ​ ( 37 ) ​ — ​ ​ — ​ ​ — ​ ​ — Common stock issued for services ​ 227,100 ​ ​ 23 ​ ​ 137,637 ​ — ​ ​ — ​ ​ — ​ ​ 137,660 Amortization of restricted common stock ​ — ​ ​ — ​ ​ 808,316 ​ — ​ ​ — ​ ​ — ​ ​ 808,316 Amortization of stock options ​ — ​ ​ — ​ ​ 56,067 ​ — ​ ​ — ​ ​ — ​ ​ 56,067 Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 5,562,274 ) ​ ​ ( 5,562,274 ) Balance - September 30, 2023 ​ 127,697,113 ​ $ 12,770 ​ $ 62,577,789 ​ 131,162 ​ $ ( 296,222 ) ​ $ ( 61,094,165 ) ​ $ 1,200,172 (1) Equity financing gross proceeds of $ 2,875,000 less issuance costs of $ 588,230 . ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 5 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-In ​ Treasury Stock ​ Accumulated ​ Stockholders' ​ Shares Amount Capital Shares Amount Deficit Equity Balance - January 1, 2022 104,792,072 ​ $ 10,479 ​ $ 39,512,122 ​ — ​ $ — ​ $ ( 23,157,559 ) ​ $ 16,365,042 Treasury stock held upon the vesting of restricted common stock — ​ — ​ ​ — ​ 194,704 ​ ​ ( 439,728 ) ​ — ​ ( 439,728 ) Common stock issued upon the exercise of warrants ​ 70,143 ​ ​ 7 ​ ​ 87,672 ​ — ​ ​ — ​ ​ — ​ ​ 87,679 Common stock issued upon the exercise of options 2,500 ​ — ​ ​ 5,075 ​ — ​ ​ — ​ — ​ 5,075 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services 6,000 ​ 1 ​ ​ 43,159 ​ — ​ ​ — ​ — ​ 43,160 Amortization of restricted common stock ​ — ​ ​ — ​ ​ 519,231 ​ — ​ ​ — ​ ​ — ​ ​ 519,231 Amortization of stock options ​ — ​ ​ — ​ ​ 15,883 ​ — ​ ​ — ​ ​ — ​ ​ 15,883 Amortization of market-based awards — ​ ​ — ​ ​ 730,048 ​ — ​ ​ — ​ — ​ 730,048 Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 4,136,555 ) ​ ​ ( 4,136,555 ) Balance - March 31, 2022 ​ 104,870,715 ​ ​ 10,487 ​ ​ 40,913,190 ​ 194,704 ​ ​ ( 439,728 ) ​ ​ ( 27,294,114 ) ​ ​ 13,189,835 Treasury stock issued upon the exercise of options ​ — ​ ​ — ​ ​ ( 46,305 ) ​ ( 33,000 ) ​ ​ 74,529 ​ ​ — ​ ​ 28,224 Common stock issued upon the exercise of warrants ​ 2,346,525 ​ ​ 234 ​ ​ 2,932,922 ​ — ​ ​ — ​ ​ — ​ ​ 2,933,156 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common stock issued for services ​ 6,000 ​ ​ 1 ​ ​ 10,260 ​ — ​ ​ — ​ ​ — ​ ​ 10,261 Amortization of restricted common stock ​ — ​ ​ — ​ ​ 422,128 ​ — ​ ​ — ​ ​ — ​ ​ 422,128 Amortization of stock options ​ — ​ ​ — ​ ​ 26,535 ​ — ​ ​ — ​ ​ — ​ ​ 26,535 Amortization of market-based awards ​ — ​ ​ — ​ ​ 565,421 ​ — ​ ​ — ​ ​ — ​ ​ 565,421 Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 5,254,685 ) ​ ​ ( 5,254,685 ) Balance - June 30, 2022 ​ 107,223,240 ​ ​ 10,722 ​ ​ 44,824,151 ​ 161,704 ​ ​ ( 365,199 ) ​ ​ ( 32,548,799 ) ​ ​ 11,920,875 Treasury stock issued upon the exercise of options ​ — ​ ​ — ​ ​ — ​ ( 30,542 ) ​ ​ 68,977 ​ ​ ( 48,819 ) ​ ​ 20,158 Common stock issued pursuant to the SEPA agreement: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For cash, net of issuance costs (1) ​ 160,782 ​ ​ 16 ​ ​ 247,855 ​ — ​ ​ — ​ ​ — ​ ​ 247,871 In satisfaction of notes payable ​ 94,458 ​ ​ 9 ​ ​ 149,991 ​ — ​ ​ — ​ ​ — ​ ​ 150,000 For the repayment of prepaid advances ​ 221,605 ​ ​ 22 ​ ​ 274,635 ​ — ​ ​ — ​ ​ — ​ ​ 274,658 Stock-based compensation: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortization of restricted common stock ​ — ​ ​ — ​ ​ 403,812 ​ — ​ ​ — ​ ​ — ​ ​ 403,812 Amortization of stock options ​ — ​ ​ — ​ ​ 23,959 ​ — ​ ​ — ​ ​ — ​ ​ 23,959 Amortization of market-based awards ​ — ​ ​ — ​ ​ 477,700 ​ — ​ ​ — ​ ​ — ​ ​ 477,700 Net loss ​ — ​ ​ — ​ ​ — ​ — ​ ​ — ​ ​ ( 5,586,585 ) ​ ​ ( 5,586,585 ) Balance - September 30, 2022 ​ 107,700,085 ​ $ 10,770 ​ $ 46,402,103 ​ 131,162 ​ $ ( 296,222 ) ​ $ ( 38,184,203 ) ​ $ 7,932,448 (1) Represents gross proceeds of $ 250,000 less $ 2,129 for amortization of issuance costs. ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 6 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ ​ September 30, ​ 2023 2022 Cash Flows From Operating Activities: ​ ​ ​ Net loss ​ $ ( 18,500,127 ) ​ $ ( 14,977,825 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Amortization of debt discount ​ ​ 695,773 ​ ​ 275,626 Non-cash lease expense ​ ​ 186,885 ​ ​ 143,861 Loss on debt extinguishment ​ ​ — ​ ​ 8,508 Depreciation and amortization expense ​ ​ 1,532,796 ​ ​ 140,829 Gain on forgiveness of PPP loan and interest ​ ​ — ​ ​ ( 158,675 ) Change in fair value of accrued issuable equity ​ ( 177,987 ) ​ ( 123,121 ) Non-cash interest expense ​ ​ — ​ ​ 576,932 Stock-based compensation ​ ​ 2,730,989 ​ ​ 3,208,778 Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ​ 245,307 ​ ​ ( 1,208,646 ) Inventory ​ ​ 410,636 ​ ​ ( 150,863 ) Inventory deposits ​ ​ 194,227 ​ ​ ( 721,462 ) Prepaid expenses and other current assets ​ 667,705 ​ ( 741,937 ) Security deposits ​ 50,213 ​ — Accounts payable ​ ( 103,457 ) ​ 377,987 Accrued expenses and other current liabilities ​ ​ 1,003,244 ​ ​ 248,301 Lease liability ​ ( 200,188 ) ​ ( 151,997 ) Deferred revenue ​ 370,934 ​ ( 112,303 ) Total Adjustments ​ 7,607,077 ​ 1,611,818 Net Cash Used In Operating Activities ​ ​ ( 10,893,050 ) ​ ​ ( 13,366,007 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows From Investing Activities: ​ ​ ​ ​ ​ ​ Deposits for purchase of property and equipment ​ ​ ( 621,107 ) ​ ​ ( 2,198,626 ) Purchases of property and equipment ​ ​ ( 237,592 ) ​ ​ ( 573,942 ) Acquisition of intangible assets ​ ​ ( 135,000 ) ​ ​ — Net Cash Used In Investing Activities ​ ( 993,699 ) ​ ( 2,772,568 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows from Financing Activities: ​ ​ ​ ​ ​ ​ Proceeds from equity financing ​ 2,875,000 ​ — Issuance costs on equity financing ​ ​ ( 320,250 ) ​ ​ — Proceeds from the SEPA ​ ​ — ​ ​ 247,871 Proceeds from prepaid advance liability ​ ​ 2,000,000 ​ ​ 10,573,068 Issuance costs on prepaid advance liability ​ ​ ( 30,000 ) ​ ​ ( 85,000 ) Repayments of prepaid advance liability ​ ( 1,575,000 ) ​ — Proceeds from notes payable (1) ​ ​ — ​ ​ 4,750,000 Issuance costs on notes payable ​ ​ — ​ ​ ( 17,200 ) Repayments of note payable ​ ​ — ​ ​ ( 1,000,000 ) Payment of financing costs incurred in connection with the SEPA ​ ​ — ​ ​ ( 72,800 ) Payment of financing costs incurred in connection with notes payable ​ ​ — ​ ​ 2,129 Repurchase of common stock ​ ​ ( 229,249 ) ​ ​ — Proceeds from the exercise of options ​ ​ — ​ ​ 25,233 Proceeds from the exercise of warrants ​ ​ — ​ ​ 3,020,836 Net Cash Provided By Financing Activities ​ ​ 2,720,501 ​ ​ 17,444,137 Net (Decrease) Increase In Cash ​ ​ ( 9,166,248 ) ​ ​ 1,305,562 Cash - Beginning of Period ​ 10,333,563 ​ 14,863,301 Cash - End of Period ​ $ 1,167,315 ​ $ 16,168,863 (1) Face value of $ 5,000,000 , less $ 250,000 original issue discount. The accompanying notes are an integral part of these condensed consolidated financial statements. ​ 7 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ September 30, ​ 2023 2022 Supplemental Disclosures of Cash Flow Information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid during the period for: ​ ​ ​ ​ ​ ​ Interest ​ $ 264,731 ​ $ 676,281 Taxes ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Right of use asset for lease liability ​ $ 51,154 ​ $ 143,640 Common stock held in treasury upon the vesting of restricted common stock ​ $ — ​ $ ( 439,728 ) Treasury stock issued upon the exercise of stock options ​ $ — ​ $ 143,506 Original issue discount on prepaid advance liability ​ $ 105,263 ​ $ — Common stock issued in satisfaction of prepaid advance liability and interest ​ $ 4,466,626 ​ $ — Prepaid advance for repayment of note payable ​ $ — ​ $ 3,850,000 Shares issued in satisfation of note payable ​ $ — ​ $ 150,000 Shares issued in satisfaction of prepaid advance liability and accrued interest ​ $ — ​ $ 274,658 Deposits applied to purchases of property and equipment ​ $ 2,716,057 ​ $ — Additions to property and equipment included in accounts payable ​ $ 195,072 ​ $ 125,451 Equipment deposits included in accounts payable ​ $ 195,299 ​ $ — Common stock issued in satisfaction of accrued issuable equity ​ $ 96,560 ​ $ — Accrual of equity financing issuance costs ​ $ 267,980 ​ $ — ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 8 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 ORGANIZATION, NATURE OF OPERATIONS AND RISKS AND UNCERTANTIES Organization and Operations KULR Technology Group, Inc., through its wholly-owned subsidiary, KULR Technology Corporation (collectively referred to as “KULR” or the “Company”), develops and commercializes high-performance thermal management technologies for electronics, batteries, and other components across a range of applications. Currently, the Company is focused on targeting both high performance aerospace and United States Department of Defense (“DOD”) applications, such as space exploration, satellite communications, and underwater vehicles, and applying them to mass market commercial applications, such as lithium-ion battery energy storage, electric vehicles, 5G communication, cloud computer infrastructure, consumer and industrial devices. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2023 and for the three and nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2022 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on March 28, 2023. The accompanying condensed consolidated balance sheet as of December 31, 2022 has been derived from the audited financial statements included in the Form 10-K. ​ NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Since the date of the Annual Report on Form 10-K for the year ended December 31, 2022, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note. Going Concern and Management’s Liquidity Plans As of September 30, 2023, the Company had cash of $ 1,167,315 and a working capital deficit of $ 6,355,104 , which includes the prepaid advance liability of $ 5,910,405 (see Note 9 – Prepaid Advance Liability). For the nine months ended September 30, 2023, the Company incurred a net loss of $ 18,500,127 and used cash in operations of $ 10,893,050 . The Company’s primary source of liquidity has historically been cash generated from equity and debt offerings. Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet future financial obligations as they become due within one year after the date that these financial statements are issued. The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. However, since the Company’s inception we have had a history of recurring net losses from operations, recurring use of cash in operating activities and declining working capital. 9 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Future cash requirements for our current liabilities include $ 4,831,517 for accounts payable and accrued expenses and $ 172,569 for future payments under operating leases. Further, pursuant to an amended agreement with Yorkville executed on November 7, 2023 (see Note 14 – Subsequent Events - Prepaid Advance Liability for further details), the Company is required to repay the Prepaid Advance balance as follows: $ 1,500,000 on or before December 31, 2023 plus accrued interest as well as a 5 % cash payment premium; $ 2,000,000 plus accrued interest as well as a 5 % cash payment premium on or before January 31, 2024; and the remaining principal amount of the Advance of $ 2,471,238 plus accrued interest as well as a 5 % cash payment premium on or before March 1, 2024. The Company has also committed to spend $ 809,379 related to capital expenditures for automation equipment, and $ 500,000 in connection with an asset purchase agreement (see Note 14 – Subsequent Events – Common Stock). These factors raise substantial doubt about the Company’s ability to meet its obligations as they become due within the twelve months from the date these condensed consolidated financial statements are issued. Management’s plans to mitigate the factors which raise substantial doubt include (i) revenue growth, (ii) reducing operating expenses through careful cost management, (iii) raising additional funds through future financings, and (iv) negotiating an extension and/or conversion to equity of the Company’s prepaid advance liability (see Note 9 – Prepaid Advance Liability). The Company’s ability to continue as a going concern is dependent upon its ability to successfully execute the aforementioned initiatives. On September 15, 2023, the Company completed a public offering of 8,214,285 shares of common stock at $ 0.35 per share, with gross proceeds of $ 2,875,000 less issuance costs of $ 588,230 , for net proceeds of $ 2,286,770 . On September 18, 2023, the Company repaid an aggregate amount of $ 1,839,731 , consisting of a principal amount of $ 1,500,000 , accrued interest in the amount of $ 264,731 and a payment premium in the amount of $ 75,000 to Yorkville against its outstanding Prepaid Advances. As of the date of the issuance of these financial statements, the Company has no additional commitments to obtain additional funding through future financings and there is no assurance that the Company will be able to successfully negotiate an extension of the prepaid advance liability repayments or its conversion to equity, or that the Company will be able to obtain additional funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives or attain profitable operations. The aforementioned factors indicate that management’s plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and the amounts and classification of liabilities that may be necessary should we be unable to continue as a going concern. Use of Estimates Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The Company’s significant estimates used in these unaudited condensed consolidated financial statements include, but are not limited to, fair value calculations for equity securities, stock-based compensation and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates. Concentrations of Credit Risk Balances that potentially subject the Company to significant concentrations of credit risk consisted primarily of cash, accounts receivable, revenue and accounts payable. 10 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Cash Concentrations A significant portion of the Company’s cash is held at one major financial institution. The Company has not experienced any losses in such accounts. Cash held in US bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. There were uninsured balances of $ 667,315 and $ 9,833,451 as of September 30, 2023 and December 31, 2022, respectively. Customer and Revenue Concentrations The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue for certain of the periods presented, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ Accounts Receivable ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ As of ​ As of ​ ​ September 30, ​ September 30, ​ September 30, December 31, ​ 2023 2022 2023 2022 2023 ​ 2022 Customer A 15 % * ​ 10 % * ​ * ​ * ​ Customer B * ​ * ​ * ​ * ​ * ​ 34 % Customer C 14 % * ​ * ​ * ​ 17 % * ​ Customer D ​ * ​ 24 % * ​ 23 % * ​ * ​ Customer E ​ 56 % * ​ 59 % * ​ 47 % * ​ Customer F * ​ 67 % * ​ 58 % * ​ 61 % Total 85 % 91 % 69 % 81 % 64 % 95 % * Less than 10% ​ There is no assurance the Company will continue to receive significant revenues from any of these customers. Any reduction or delay in operating activity from any of the Company’s significant customers, or a delay or default in payment by any significant customer, or termination of agreements with significant customers, could materially harm the Company’s business and prospects. As a result of the Company’s significant customer concentrations, its gross profit and results of operations could fluctuate significantly due to changes in political, environmental, or economic conditions, or the loss of, reduction of business from, or less favorable terms with any of the Company’s significant customers. Vendor Concentrations Vendors representing 10% or more of our purchases for the three and nine months ended September 30, 2023 and 2022, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended For the Nine Months Ended ​ ​ September 30, September 30, ​ ​ 2023 2022 2023 2022 ​ Vendor A 25 % 65 % 11 % 83 % Vendor B * ​ * ​ 11 % * ​ ​ 25 % 65 % 22 % 83 % * Less than 10% 11 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Inventory The Company capitalizes inventory costs associated with products when future commercialization is considered probable, and a future economic benefit is expected to be realized. These costs consist of finished goods, raw materials, manufacturing-related costs, transportation and freight, and other indirect overhead costs. Inventory is comprised of carbon fiber velvet (“CFV”) thermal interface solutions and internal short circuit batteries, which are available for sale, as well as raw materials and work in process related primarily to the manufacture of safe cases. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The cost of inventory that is sold to third parties is included within cost of sales and the cost of inventory that is given as samples is included within operating expenses. The Company periodically reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down to net realizable value. Finished goods inventory is held on-site at the Company’s San Diego, California location. Certain raw materials are held off-site with our contract manufacturers. Inventory at September 30, 2023 and December 31, 2022 consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2023 ​ 2022 Raw materials ​ $ 261,956 ​ $ 1,075,310 Work-in-process ​ ​ — ​ ​ 2,977 Finished goods ​ 1,289,443 ​ 883,748 Total inventory ​ $ 1,551,399 ​ $ 1,962,035 ​ Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The following five steps are applied to achieve that core principle: ● Step 1: Identify the contract with the customer; ● Step 2: Identify the performance obligations in the contract; ● Step 3: Determine the transaction price; ● Step 4: Allocate the transaction price to the performance obligations in the contract; and ● Step 5: Recognize revenue when the company satisfies a performance obligation. The Company recognizes revenue primarily from the following different types of contracts: ● Product sales – Revenue is recognized at the point in time the customer obtains control of the goods and the Company satisfies its performance obligation, which is generally at the time it ships the product to the customer. 12 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ● Contract services – Revenue is recognized pursuant to the terms of each individual contract when the Company satisfies the respective performance obligations, which could be recognized at a point in time or over the term of the contract. The following table summarizes the Company’s revenue recognized by type of contract in its condensed consolidated statements of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2023 2022 2023 2022 Product sales ​ $ 1,896,470 ​ $ 1,369,857 ​ $ 5,483,098 ​ $ 2,100,120 Contract services ​ 1,144,537 ​ 23,328 ​ 2,013,217 ​ 81,110 Total revenue ​ $ 3,041,007 ​ $ 1,393,185 ​ $ 7,496,315 ​ $ 2,181,230 ​ The contract liabilities included in deferred revenue represent payments received from customers for which the Company had not yet satisfied its performance obligation under the contract, or the customers have not officially accepted the goods or services provided under the contract. The Company expects to satisfy the remaining performance obligations and recognize the revenue related to its deferred revenue balance within the next twelve months. During the three and nine months ended September 30, 2023 and 2022, there was no revenue recognized from performance obligations satisfied (or partially satisfied) in previous periods. As of September 30, 2023 and December 31, 2022, the Company had $ 43,413 and $ 34,402 of deferred labor and other costs, respectively, which is included in prepaid expenses and other current assets in the Company’s unaudited condensed consolidated balance sheets. Deferred labor and other costs represent costs to fulfill the Company’s contract revenue. The Company will recognize the deferred labor and other costs as cost of revenue at the point in time that the Company recognizes the related revenue, which is generally at the time the services are provided and/or the product/service is accepted by the customer. Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent shares outstanding during each period. ​ The following table presents the computation of basic and diluted net loss per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended For the Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2023 2022 ​ 2023 2022 Numerator: ​ ​ ​ ​ Net loss attributable to common stockholders ​ $ ( 5,562,274 ) ​ $ ( 5,586,585 ) ​ $ ( 18,500,127 ) ​ $ ( 14,977,825 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Denominator (weighted average quantities): ​ ​ ​ ​ ​ ​ ​ ​ Common shares issued ​ 120,704,579 ​ 107,402,727 ​ 118,146,547 ​ 106,271,765 Less: Treasury shares purchased ​ ( 131,162 ) ​ ( 131,494 ) ​ ( 131,162 ) ​ ( 122,944 ) Less: Unvested restricted shares ​ ( 3,433,400 ) ​ ( 1,948,370 ) ​ ( 2,952,892 ) ​ ​ ( 2,106,923 ) Add: Accrued issuable equity ​ ​ 4,435 ​ ​ 249,957 ​ ​ 87,268 ​ ​ 181,480 Denominator for basic and diluted net loss per share ​ ​ 117,144,452 ​ ​ 105,572,820 ​ ​ 115,149,761 ​ ​ 104,223,378 ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic and diluted net loss per common share ​ $ ( 0.05 ) ​ $ ( 0.05 ) ​ $ ( 0.16 ) ​ $ ( 0.14 ) ​ 13 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following shares were excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2023 2022 Prepaid advance (1) ​ 20,866,741 ​ — Unvested restricted stock awards ​ 3,471,008 ​ 1,897,500 Unvested market-based equity awards ​ — ​ 3,000,000 Restricted stock units ​ 3,000,000 ​ — Options 955,216 510,216 Warrants ​ 2,524,410 ​ 2,524,410 Total 30,817,375 7,932,126 (1) Shares to be issued if the Company defaults on any of its cash payment obligations. The shares are estimated using $ 0.29 per share, which is the effective floor price as of September 30, 2023 pursuant to the amendment to the letter agreement to the SEPA (see Note 9 – Prepaid Advance Liability). Recently Issued Accounting Pronouncements In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. Management does not expect the adoption of this pronouncement will have a material effect on the Company’s financial statements. Recently Adopted Accounting Pronouncements In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance is effective for the Company for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted. The Company adopted this ASU on January 1, 2023, using the modified retrospective approach and it did not have a material impact on its condensed consolidated financial statements. ​ NOTE 3 ASSET ACQUISITION ​ On May 4, 2023 (the “Asset Purchase Date”), the Company entered into an agreement (the “Asset Purchase Agreement”) with a seller (the “Seller”), pursuant to which the Company purchased all of the assets, primarily intellectual property, of the Seller (the “Acquired Assets”) for consideration of $ 75,000 (the “Total Consideration”), which was paid in cash on May 11, 2023. In addition, the seller has been employed by the Company. 14 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The Asset Purchase Agreement includes customary representations, warranties and covenants of the Company and the Seller. The Asset Purchase Agreement also contains post-closing indemnification provisions pursuant to which the parties have agreed to indemnify each other against losses resulting from certain events, including breaches of representations and warranties, covenants and certain other matters. The Company determined that the transaction should be accounted for as an asset acquisition because substantially all of the fair value of the Acquired Assets is concentrated in a single asset. The total cost of the intellectual property acquired of $ 75,000 is included in intangible assets on the accompanying condensed consolidated balance sheet and is being amortized over its estimated useful life of 5 years . ​ NOTE 4 INVENTORY DEPOSITS Inventory deposits consist of amounts paid in advance to vendors to secure future deliveries of specific finished goods and raw materials which will be received and sold in future periods. As of September 30, 2023 and December 31,2022, the Company had outstanding inventory deposits of $ 91,033 and $ 285,260 , respectively. ​ NOTE 5 PREPAID EXPENSES AND OTHER CURRENT ASSETS As of September 30, 2023 and December 31, 2022, prepaid expenses and other current assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ 2023 2022 Compensation costs ​ $ 500,000 ​ $ 375,000 Dues and subscriptions ​ ​ 105,935 ​ ​ 75,889 Marketing and sponsorships ​ ​ 95,698 ​ ​ 574,636 Security Deposits (Note 10) ​ ​ 50,213 ​ ​ — Deferred expenses ​ ​ 43,413 ​ ​ 34,402 Conferences and seminars ​ ​ 42,878 ​ ​ — Insurance ​ ​ 38,467 ​ ​ 12,776 Professional fees ​ ​ 28,250 ​ ​ 25,787 Vendor receivables ​ ​ 1,995 ​ ​ 368,069 Research and development ​ ​ — ​ ​ 62,329 Other ​ ​ 38,454 ​ ​ 84,120 Total prepaid expenses and other current assets ​ $ 945,303 ​ $ 1,613,008 ​ Prepaid marketing and sponsorship costs as of December 31, 2022, primarily consist of two sponsorship agreements with a marketing partner whereby the Company is required to make upfront payments which were amortized over the respective service periods of the agreements. As of September 30, 2023, the sponsorship costs were fully amortized. ​ NOTE 6 EQUIPMENT DEPOSITS The Company entered into agreements with third party contractors for facility improvements, the design and construction of a battery packaging and inspection automation system, and automated robotic tending system. As of September 30, 2023 and December 31,2022, the Company had outstanding deposits of $ 1,615,286 and $ 3,514,937 , respectively, in connection with these agreements. The decrease is due to equipment being transferred to property and equipment upon completion by third party contractors. ​ 15 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 7 ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES As of September 30, 2023 and December 31, 2022, accrued expenses and other current liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2023 2022 Professional fees ​ $ 1,645,354 ​ $ 1,180,000 Payroll and vacation ​ ​ 498,581 ​ ​ 464,453 Research and development ​ ​ 456,192 ​ ​ 196,409 Legal fees ​ 130,532 ​ ​ 2,000 Inventory ​ ​ 111,863 ​ ​ 58,804 Board compensation ​ 61,250 ​ ​ 122,500 Marketing and advertising fees ​ — ​ ​ 3,999 Subscriptions ​ — ​ ​ 65,000 Other ​ 114,554 ​ ​ 49,112 Total accrued expenses and other current liabilities ​ 3,018,326 ​ ​ 2,142,277 Add: Accrued interest, non-current ​ ​ — ​ ​ 157,054 Total accrued expenses and other current liabilities ​ $ 3,018,326 ​ $ 2,299,331 ​ NOTE 8 ACCRUED ISSUABLE EQUITY A summary of the accrued issuable equity activity during the nine months ended September 30, 2023 is presented below: ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ September 30, 2023 Beginning Balance ​ $ 227,956 Additions ​ ​ 145,130 Deductions ​ ​ ( 96,559 ) Mark-to market ​ ​ ( 177,987 ) Ending Balance ​ $ 98,540 ​ During the nine months ended September 30, 2023, the Company entered into and settled certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the Company. On the respective dates the contracts were entered into, the estimated fair value of the shares to be issued was an aggregate of $ 145,130 based on the quoted market prices of the shares. In addition, the Company settled certain of its accrued issuable equity obligations through the issuance of an aggregate of 136,000 shares with an aggregate fair value of $ 96,559 , remeasured at the date of settlement based on the quoted market prices of the shares. The Company recorded (losses) gains in the aggregate amount of $( 42,773 ) and $ 177,987 during the three and nine months ended September 30, 2023, respectively, and recorded gains in the aggregate amount of $ 27,401 and $ 123,121 during the three and nine months ended September 30, 2022, respectively, related to changes in the fair value of accrued issuable equity (see Note 13 – Stockholders’ Equity, Stock-Based Compensation for additional details). The fair value of the accrued but unissued shares as of September 30, 2023 was $ 98,540 , based on Level 1 inputs, which consist of quoted prices for the Company’s common stock in active markets. 16 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 9 PREPAID ADVANCE LIABILITY ​ The Company’s prepaid advance liability consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Amount of Original Less: Prepaid Advance ​ ​ ​ Prepaid Advance ​ Issue ​ Debt ​ Liability, ​ ​ ​ Liability ​ Discount ​ Discount ​ Net of Discount ​ Balance, December 31, 2022 ​ $ 9,000,000 ​ $ 473,631 ​ $ ( 621,341 ) ​ $ 8,852,290 (1) Proceeds from prepaid advance ​ 2,000,000 ​ — ​ — ​ 2,000,000 ​ Original issue discount on prepaid advance ​ — ​ 105,263 ​ ( 105,263 ) ​ — ​ Legal fees ​ — ​ — ​ ( 30,000 ) ​ ( 30,000 ) ​ Repayments in cash ​ ​ ( 1,500,000 ) ​ ​ ( 75,000 ) ​ ​ — ​ ​ ( 1,575,000 ) ​ Repayments in shares of common stock ​ ( 3,850,000 ) ​ ( 182,658 ) ​ — ​ ( 4,032,658 ) ​ Amortization of original issue discount ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Amortization of debt discount ​ — ​ — ​ 695,773 ​ 695,773 ​ Outstanding, September 30, 2023 ​ $ 5,650,000 ​ $ 321,236 ​ $ ( 60,831 ) ​ $ 5,910,405 ​ (1) The current portion of this liability was $ 5,655,612 as of December 31, 2022. ​ On September 23, 2022, the Company entered into a Supplemental Agreement (the “Supplemental Agreement”) to its Standby Equity Purchase Agreement (the “SEPA”) with Yorkville. Under the Supplemental Agreement, the Company may from time-to-time request advances of up to $ 15,000,000 (each, a “Prepaid Advance”) from Yorkville with a limitation on the aggregate amount of such advances of $ 50,000,000 . At any time that there is a balance outstanding under a Prepaid Advance, the Company is not permitted to deliver Advance Notices (as defined in Note 13, Stockholders’ Equity) under the SEPA. Each Prepaid Advance matures 12 months after the date of the closing of such advance (the “Prepaid Advance Date”), and accrues interest at 10 % per annum, subject to an increase to 15 % per annum upon events of default as defined. Any Prepaid Advance balance that remains outstanding at maturity must be repaid in cash. Pursuant to the terms of the Supplemental Agreement, Yorkville has the right to receive shares to pay down Prepaid Advances, and may select the timing and delivery of such shares (via an “Investor Notice”), in an amount up to the balance of the Prepaid Advance at a price equal to the lower of (a) 135 % of the volume weighted average price (“VWAP”) of the Company’s common stock on the day immediately prior the closing of the Prepaid Advance, or (b) 95 % of the lowest VWAP during the three days immediately prior to the Investor Notice. On March 10, 2023, the Company and Yorkville agreed and closed on a second Prepaid Advance (the “Second Advance”). The Company recorded additional prepaid advance liability in the amount of $ 2,105,263 , which consisted of $ 2,000,000 cash proceeds received, plus an original issue discount of $ 105,263 . Interest accrues on the outstanding balance of each Prepaid Advance at an annual rate of 10 %, subject to an increase to 15 % upon events of default, as defined. On August 16, 2023, and as amended on August 23, 2023 and August 30, 2023, the Company and Yorkville entered into a letter agreement (the “Letter Agreement”), intended to supplement and modify the Supplemental Agreement to extend the repayment date of the Prepaid Advance balance as follows: (i) an initial payment of $ 1,500,000 plus accrued interest as well as a 5 % cash payment premium on or before September 22, 2023 or the date of the closing of any financing conducted by the Company; (ii) $ 1,500,000 on or before November 30, 2023 plus accrued interest as well as a 5 % cash payment premium; (iii) $ 2,000,000 plus accrued interest as well as a 5 % cash payment premium on or before December 31, 2023; and (iv) the remaining principal amount of the Advance of $ 2,471,238 plus accrued interest as well as a 5 % cash payment premium on or before January 31, 2024. In addition, Yorkville shall not submit Investor Notices prior to December 1, 2023. See Note 14 – Subsequent Events – Prepaid Advance Liability for details regarding a new amendment. 17 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) On September 18, 2023, the Company repaid an aggregate amount of $ 1,839,731 , consisting of a principal amount of $ 1,500,000 , accrued interest in the amount of $ 264,731 and a payment premium in the amount of $ 75,000 . During the nine months ended September 30, 2023, the Company issued 4,078,971 shares of common stock, at purchase prices per share ranging from $ 0.57 to $ 1.20 , pursuant to Investor Notices submitted by Yorkville for aggregate proceeds of $ 4,466,626 . The proceeds were applied against the principal and interest due for the Initial Advance in the aggregate amounts of $ 4,032,656 and $ 433,970 , respectively. As of September 30, 2023, the gross principal balance on the Prepaid Advance liability is $ 5,971,238 , which consists of Initial Advance and Second Advance of $ 3,865,975 and $ 2,105,263 , respectively, including the original issue discount of $ 215,975 and $ 105,263 , respectively. During the three and nine months ended September 30, 2023, the Company recorded interest expense in the amount of $ 184,645 and $ 541,686 , respectively, and recorded amortization of debt discount in the amount of $ 234,899 and $ 695,773 , respectively, in connection with the Prepaid Advance liability. ​ NOTE 10 LEASES On January 18, 2023, the Company entered into a new lease agreement for office space in Webster, Texas. The initial lease term is twelve months and thirteen days. Monthly rental payments under the new lease are $ 5,047 , which is comprised of $ 4,245 of base rent plus $ 802 of common area maintenance fees. The Company determined that the value of the lease liability and the related right-of-use asset at inception was $ 51,154 , using an estimated incremental borrowing rate of 5 %. The Company also leases office space in San Diego, California pursuant to an operating lease which expires May 31, 2024. During the three and nine months ended September 30, 2023, operating lease expenses were $ 67,838 and $ 199,584 , respectively. During the three and nine months ended September 30, 2022, operating lease expenses were $ 57,522 and $ 188,854 , respectively. As of September 30, 2023, the Company did not have any financing leases. Maturities of lease liabilities as of September 30, 2023 were as follows: ​ ​ ​ ​ ​ Years ​ Amount For the period from October 1, 2023 through December 31, 2023 $ 72,247 2024 ​ ​ 103,432 Total future minimum lease payments ​ $ 175,679 Less: amount representing imputed interest ​ ( 3,110 ) Present value of lease liabilities ​ $ 172,569 Less: current portion ​ ​ ( 172,569 ) Lease liabilities, non current portion ​ $ — ​ The Company paid a security deposit of $ 50,213 in connection with the San Diego lease agreement which is recorded within the prepaid expenses and other current assets section of the balance sheet as of September 30, 2023. ​ 18 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Supplemental cash flow information related to the lease was as follows: ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended ​ September 30, ​ ​ ​ 2023 ​ Cash paid for amounts included in the measurement of lease liabilities: ​ ​ ​ ​ Operating cash flows used in operating activities ​ $ 200,188 ​ Right-of-use assets obtained in exchange for lease obligations ​ ​ ​ ​ Operating leases ​ $ 51,154 ​ Weighted Average Remaining Lease Term (Years) ​ ​ ​ ​ Operating leases ​ ​ 0.64 years Weighted Average Discount Rate ​ ​ ​ ​ Operating leases ​ ​ 5.0 % ​ NOTE 11 RELATED PARTY TRANSACTIONS Effective August 26, 2022, the Company entered into an eight-month consulting agreement with the father of the Company’s Chief Technology Officer (the “Related Consultant”), which shall automatically renew for an additional four months unless otherwise terminated. During the three and nine months ended September 30, 2023, expense recognized for services provided by the Related Consultant were $ 4,845 and $ 32,055 , respectively, and are included within selling, general and administrative expenses on the unaudited condensed consolidated statements of operations. For the three and nine months ended September 30, 2022, expenses recognized for services provided by the Related Consultant was $ 2,115 and $ 2,115 . On July 24, 2023, the Related Consultant accepted an employment offer by the Company which became effective on August 7, 2023. As of September 30, 2023 and December 31, 2022, the Company did no t have material accounts payable outstanding with related parties. NOTE 12 COMMITMENTS AND CONTINGENCIES Patent License Agreement During February 2023, the Company entered into a licensing agreement whereby the Company obtained an exclusive license to commercialize its patented Format Fractional Thermal Runaway Calorimeter. The agreement is effective as long as the licensed patents are enforceable, subject to certain early termination provisions specified in the agreement. In consideration, the Company agreed to pay the following: (i) a cash payment of $ 60,000 payable upon the execution of the agreement (which was capitalized as an intangible asset and will be amortized over its useful life), and (ii) royalties of 5.5 % on the net sales price of royalty-based products and services for each accounting period, as defined in the agreement, with minimum annual royalty payments of $ 20,000 . Appointment of Vice President, Sales On January 16, 2023, the Company appointed a Vice President of Sales (the “VP of Sales”), and issued the VP of Sales 298,507 shares of restricted common stock. The restricted common stock had a grant date fair value of $ 400,000 , and vests in four equal annual installments beginning January 16, 2024 based solely on continued service. The grant date fair value will be amortized ratably over the vesting period. In addition, the Company committed to a one-year guaranteed commission of $ 200,000 , payable in four quarterly installments as well as a severance package of $ 250,000 and one-year of family health insurance if the VP of Sales is terminated without cause (as defined) within one year of hire. Appointment of Chief Financial Officer On March 31, 2023, the Company appointed an individual to serve as Chief Financial Officer (the “CFO”) of the Company and issued the CFO 1,500,000 shares of restricted stock. The restricted common stock had an aggregate grant date fair value of $ 1,380,000 , and vests in five equal annual installments beginning March 31, 2024 based solely on continued service. 19 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ NOTE 13 STOCKHOLDERS’ EQUITY Standby Equity Purchase Agreement (“SEPA”) and Supplemental SEPA On May 13, 2022, the Company entered into the SEPA with Yorkville. Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Yorkville up to an aggregate of $ 50,000,000 of its shares of common stock, par value $ 0.0001 per share, at the Company’s request any time during the commitment period commencing on May 13, 2022 and terminating on the first day of the month following the 24-month anniversary of the SEPA. Each sale (an “Advance”) that the Company requests under the SEPA (via an “Advance Notice”) may be for a number of shares of common stock with an aggregate value of up to $ 5,000,000 . Shares are sold under the SEPA at 98.0 % of the average of the VWAPs during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance Notice to Yorkville. Advances are subject to certain limitations, including that Yorkville will not purchase any shares that would result in it owning more than 4.99 % of the Company’s outstanding common stock at the time of an Advance, or more than the amount of shares registered under the registration statement in effect at the time of the Advance. Further, the aggregate amount of shares purchased under the SEPA (as defined) cannot exceed 19.9 % of the Company’s outstanding common stock as of the date of the SEPA. During the nine months ended September 30, 2023, the Company issued 4,078,971 shares of common stock, at purchase prices per share ranging from $ 0.57 to $ 1.20 , pursuant to Investor Notices submitted by Yorkville for aggregate proceeds of $ 4,466,626 . The proceeds were applied against the principal and interest due for the Initial Advance in the aggregate amounts of $ 4,032,656 and $ 433,970 , respectively. As of September 30, 2023, the gross principal balance on the Prepaid Advance liability is $ 5,971,238 , which consists of the Initial Advance and Second Advance of $ 3,865,975 and $ 2,105,263 , respectively, including the original issue discount of $ 215,975 and $ 105,263 , respectively. See Note 9 – Prepaid Advance Liability, for details related to a supplemental agreement to the SEPA. Common Stock ​ On September 15, 2023, the Company completed a public offering of 8,214,285 shares of common stock, priced at $ 0.35 per share, with gross proceeds of $ 2,875,000 less issuance costs of $ 588,230 , for net proceeds of $ 2,286,770 . During the nine months ended September 30, 2023, the Company issued an aggregate of 232,600 shares of immediately vested common stock with a grant date value of $ 144,480 for legal services. See Note 13 - Stockholders' Equity - Restricted Stock Awards, for details related to restricted equity grants and Note 9 - Prepaid Advance Liability for details related to additional share issuances. Stock Options ​ The Company has computed the fair value of stock options granted using the Black-Scholes option pricing model. In applying the Black-Scholes option pricing model, the Company used the following range of weighted average assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For The Three Months Ended ​ For The Nine Months Ended ​ September 30, ​ September 30, ​ 2023 2022 2023 2022 Risk free interest rate ​ 4.77 % - 5.40 % ​ 2.85 % - 4.21 % ​ 3.92 % - 5.40 % ​ 1.18 % - 4.21 % Expected term (years) ​ 3.5 ​ 3.8 ​ 3.5 ​ 3.5 - 3.9 Expected volatility ​ 109 % ​ 106 % ​ 105 % - 109 % ​ 106% - 116% Expected dividends ​ 0 % ​ 0 % ​ 0 % ​ 0 % ​ 20 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) For the three and nine months ended September 30, 2023, the weighted average grant date fair value per share of options was $ 0.18 and $ 0.47 , respectively, compared to $ 1.08 and $ 1.31 , respectively, for the three and nine months ended September 30, 2022. A summary of options activity during the nine months ended September 30, 2023 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted ​ ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ Number of ​ Exercise ​ Remaining ​ Intrinsic ​ Options Price Term (Yrs) Value Outstanding, January 1, 2023 640,216 ​ $ 1.72 ​ Granted 325,000 ​ 0.87 ​ Exercised — ​ — ​ Expired — ​ — ​ Forfeited ( 10,000 ) ​ 2.08 ​ Outstanding, September 30, 2023 955,216 ​ $ 1.43 2.9 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exercisable, September 30, 2023 350,036 ​ $ 1.07 1.3 ​ $ — ​ The following table presents information related to stock options as of September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Options Exercisable ​ ​ ​ ​ Weighted ​ ​ ​ Outstanding ​ Average ​ Exercisable Exercise ​ Number of ​ Remaining Life ​ Number of Price Options In Years Options $ 0.62 - $ 0.99 ​ 325,486 ​ 0.7 ​ 162,806 $ 1.21 - $ 1.50 ​ 250,000 ​ 4.3 ​ 35,000 $ 1.55 - $ 1.99 ​ 90,000 ​ 3.6 ​ 22,500 $ 2.05 - $ 2.44 ​ 289,730 ​ 2.8 ​ 129,730 ​ ​ 955,216 ​ 1.3 ​ 350,036 ​ As of September 30, 2023, there was $ 418,069 of unrecognized stock-based compensation expense related to the above stock options, which will be recognized over the weighted average remaining vesting period of 2.8 years. Restricted Stock Awards The following table presents information related to restricted stock awards as of September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares of ​ Weighted Average ​ ​ Restricted ​ Grant Date ​ Common Stock Fair Value Non-vested RSAs, January 1, 2023 2,042,500 ​ $ 2.50 Granted 2,218,508 ​ 0.96 Vested ( 715,000 ) ​ 2.42 Forfeited ( 75,000 ) ​ 2.08 Non-vested RSAs, September 30, 2023 3,471,008 ​ $ 1.54 ​ 21 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) On March 31, 2021, the Company granted 2,000,000 restricted shares of common stock to the Company’s President and Chief Operating Officer. The restricted shares vest in four (4) equal annual installments, the first installment of which vested on March 1, 2023. On March 31, 2023, and effective as of March 1, 2023, the Company withheld and cancelled 175,000 shares of its common stock to satisfy an aggregate of $ 229,249 of payroll tax withholdings and remittance obligations in connection with vesting of 500,000 shares of restricted stock, resulting in a net settlement of 325,000 shares. The withholding and cancellation of the 175,000 shares represented a retirement of shares at a price per share equal to $ 1.31 , the closing price per share of our common stock on the trading day prior to the March 1, 2023, the effective date of the share cancellation. ​ As of September 30, 2023, there was $ 4,246,243 of unrecognized stock-based compensation expense related to restricted stock awards that will be recognized over the weighted average remaining vesting period of 2.72 years. Restricted Stock Units The following table presents information related to restricted stock units (“RSUs”) as of September 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ Shares of Restricted ​ Grant Date ​ Common Stock Fair Value Non-vested RSUs, January 1, 2023 3,000,000 ​ $ 2.05 Granted — ​ ​ — Vested — ​ ​ — Forfeited ​ — ​ ​ — Non-vested RSUs, September 30, 2023 ​ 3,000,000 ​ $ 2.05 ​ As of September 30, 2023, there was $ 3,240,067 of unrecognized stock-based compensation expense related to restricted stock units that will be recognized over the weighted average remaining vesting period of 3.09 years. Stock-Based Compensation During the three and nine months ended September 30, 2023, the Company recognized stock-based compensation expense of $ 846,633 and $ 2,730,989 , respectively, related to restricted stock awards, restricted stock units, warrants and stock options, of which $ 560,139 and $ 2,391,509 , respectively, are included within selling, general and administrative expenses, and $ 286,494 and $ 339,480 , respectively, are included within research and development expenses on the unaudited condensed consolidated statements of operations. During the three and nine months ended September 30, 2022, the Company recognized stock-based compensation expense of $ 922,311 and $ 3,208,778 , respectively, related to restricted stock awards, restricted stock units, market-based awards, and stock options, of which $ 916,708 and $ 3,185,373 , respectively, are included within selling, general and administrative expenses, and $ 5,603 and $ 23,405 , respectively, are included within research and development expenses in the unaudited condensed consolidated statements of operations. 22 Table of Contents KULR TECHNOLOGY GROUP, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table presents information related to stock-based compensation for the three and nine months ended September 30, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For The Three Months Ended ​ For The Nine Months Ended ​ September 30, ​ September 30, ​ 2023 2022 2023 2022 Common stock for services ​ $ 41,100 ​ $ — ​ $ 47,920 ​ $ 53,421 Accrued issuable equity (common stock) ​ 24,635 ​ 16,840 ​ 145,130 ​ ( 29,360 ) True up to accrued issuable equity ​ ​ ( 83,485 ) ​ ​ — ​ ​ — ​ ​ — Amortization of stock options ​ 56,067 ​ 23,959 ​ 140,983 ​ 66,377 Amortization of market-based awards ​ — ​ 477,700 ​ — ​ 1,773,169 Amortization of restricted stock awards and units ​ 808,316 ​ 403,812 ​ 2,396,956 ​ 1,345,171 Total ​ $ 846,633 ​ $ 922,311 ​ $ 2,730,989 ​ $ 3,208,778 ​ NOTE 14 SUBSEQUENT EVENTS Common Stock On October 6, 2023, the Company issued 273,723 shares of immediately vested common stock with a value of $ 109,489 as equity consideration pursuant to the terms of an agreement (the “Asset Purchase Agreement”) executed on October 6, 2022. Prepaid Advance Liability On November 7, 2023, the Company and Yorkville executed an amended Letter Agreement revising repayment terms, as follows: a) On or before December 31, 2023, the Company shall pay (i) $ 1,500,000 in principal, (ii) 5 % payment premium and (iii) all outstanding accrued and unpaid interest. b) On or before January 31, 2024, the Company shall pay (i) $ 2,000,000 in principal, (ii) 5 % payment premium and (iii) all outstanding accrued and unpaid interest. c) On or before March 1, 2024, the Company shall pay (i) the remaining principal amount, (ii) 5 % payment premium and (iii) all outstanding accrued and unpaid interest. ​ ​ ​ ​ 23 ​